Tax Credits and Incentives
(reprinted with permission from Alliance For Green Heat)
Financial incentives come in different shapes and sizes, and every type is found with wood and pellet stoves and furnaces. Exemptions, deductions, credits, rebates and vouchers all work differently, providing incentives that may be more valuable for one homeowner’s situation than for his or her neighbor’s.
Individuals can also benefit from both federal and state incentives, lowering the ultimate price of a stove or furnace.
Tax credits are the most valuable end-of-year benefit, because they directly reduce the amount of taxes owed dollar for dollar. By subtracting directly from taxes owed, instead of from income calculations, a tax credit can be three or more times more valuable than a tax deduction. For example, a tax credit of $500 for someone in the 28 percent tax bracket is equivalent to a tax deduction of $1,700.
Tax exemptions are worth a set dollar amount and are subtracted from taxable income at the end of the financial year. They are worth about 28 percent of their dollar value for most tax payers (depending on your tax bracket).
Tax deductions are also subtracted from taxable income, but they reflect an expense and are only valuable if you itemize your deductions, instead of taking the standard deduction. If you itemize, a deduction will probably be worth about the same as an exemption – 28 percent for many households; less for lower tax brackets and more for higher tax brackets. Renters and those who do not invest large amounts of money often do not find itemized deductions worthwhile.
Property taxes are often exempted for the value of renewable energy systems. For example, in New Hampshire, towns can exempt the value of biomass systems from local property taxes. In some states, property tax abatements or credits apply to renewable energy systems.
Rebates and vouchers save a consumer money directly when they purchase an item, or quickly thereafter, so they are more immediate for households than the end-of-year incentives. These incentives are much more valuable to low income households who may not pay taxes at the end of the year anyway, or those who couldn’t afford to wait that long. For change-out programs, rebates and vouchers are much more effective than tax incentives. A rebate could be instant, point-of-sale or may involve waiting a few weeks or more to get the rebate back in the mail.
Vouchers work like instant rebates, but you are usually issued the voucher earlier and must submit it as a cash equivalent at the time of purchase. They are then redeemed by the retailer at a government office or other issuing organization.
You still have a several weeks left to take advantage of the U.S. Biomass Tax Credit. A $300 federal tax credit applies for residential biomass heating products that meets the 75% efficiency requirement and are purchased from January 1, 2015 – December 31, 2016.
Look carefully at the type of incentives available in your area when calculating your potential savings, and check to see that you have correctly budgeted around them. Much of this information is shared with you below. You can also check http://www.forgreenheat.org/incentives/state.html to find incentives for your state and pages 16 and 17 of Green Energy Times.
The following information on biomass boiler and furnace incentives in NH, MA, VT, and NY is shared with us from Jim Van Valkenburgh of Froling Energy.
Residential and Small Commercial, Pellet: 40% rebate on installed systems, $10k max; Thermal Storage Adder, $2k max; Maximum system output 120,000 Btu/hr & less; Additional incentives for low income households
Non-Profit, Pellet: 50% rebate on installed systems, $25k max; Includes public and affordable housing
Commercial, Pellet/Chip: 35% rebate on installed systems, $175k max; 5% Thermal Storage Adder, $25k max; 2.5% Cascading Systems Adder, $12.5k max; 2.5% Distribution Efficiency Adder, $12.5k max; 5% Non-Profit/Public/Aff Housing Adder, $25k max; Maximum rebate $250,000
Public Schools, SAPHIRE Program By Mass DOER, Pellet/Chip: Grants for schools fitting the criteria may reach 75%; Maximum grant is $350,000; Bond financing assistance available; Up to 75% of feasibility study costs up to $25k
Thermal RECs (AECs), Pellet/Chip: A new program with rules being finalized by 2017; REC sales net reduction in biomass fuel costs
MassSave Heat Loans Available: 0% interest loan for 7-year term for up to $25,000
For more information, visit www.masscec.com/learn-about-biomass-heating
Residential, Pellet: 40% rebate on installed systems, $10k max; Fuel Storage Adder, $500 max for 8 tons
Commercial, Pellet: 40% rebate on installed systems, $65k max; 30% rebate on thermal storage, $5k max; Thermal REC Equipment Adder, $5k max; Maximum boiler output, 2.5 MMBtu
Commercial Grant Program, Pellet/Chip: To be released in Fall 2016; For larger systems that don’t qualify for rebates, riteria varies usually including wood chip systems
Thermal RECs, Pellet/Chip
For more information visit, www.puc.nh.gov. Look for the Sustainable Energy Division
Residential Wood Pellet Stove: $1,500 (up to $2,500 for income qualified homeowners)
Residential Cordwood Boiler Systems: 25% of installed cost up to $5,000 per unit; $5k adder for recycling of old outdoor or indoor wood boiler; $2.5k adder for recycling whole house wood furnace; Thermal storage tank is required.
Residential Wood Pellet Boiler Systems: 45% rebate on installed systems, $36k max; Indoor boilers only less than 300k Btu/hr output; $5k adder for recycling old indoor or outdoor boiler; $2.5k adder for recycling whole house wood furnace; Thermal storage tank is required.
Small Commercial Cordwood Boiler: 25% rebate of installed cost, $5k max; $5k adder for recycling old outdoor or indoor wood boiler; $2.5k adder for recycling whole house wood furnace; Thermal storage tank is required.
Small Commercial Wood Pellet Boiler: (<300MBtu/h, 88kw) 45% rebate of installed cost, 36k max; $5k adder for recycling old outdoor or indoor wood boiler; $2.5k adder for recycling whole house wood furnace; Thermal storage tank is required.
Large Commercial Wood Pellet Boiler Systems: (>300MBtu/H (88kW) 40% rebate on single boiler systems, $200k max; 45% rebate on tandem boiler systems, $270k max; Indoor boilers only; Thermal storage tank is required. For more information at bit.ly/NY-heat-info
Flat Rate Incentive For All Project Types: $3000 max for single boiler/furnace systems; $70,000 lifetime incentive cap
Custom Incentive for All Project Types: $1.25 per ft2 of space heated by biomass system; $60,000 maximum incentive; Thermal storage tank adder $10/1000 Btu/hr output – maximum adder of $10k; $70,000 lifetime incentive cap; This program applies to systems with multiple units
Customer Incentive for Public Serving Institutions: $1.25 per ft2 of space heated by biomass system; $80,000 maximum incentive; Thermal storage tank adder of $10/1000 Btu/hr output – maximum adder of $15k; $95,000 lifetime incentive cap
All programs cover wood pellets, chips, boilers, and furnaces. Woodchip systems must meet an 80% (HHV) efficiency standard and limit total particulate matter emissions to no more than a 0.10 lb/MMBtu output. All systems need a minimum of 21 days’ worth of pellet storage.
For more information visit, www.rerc-vt.org